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Given the current situation, for a developing country like India, what should be the primary objective of monetary policy – accelerate growth or price stability? Critically examine.

Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

5. Given the current situation, for a developing country like India, what should be the primary objective of monetary policy – accelerate growth or price stability? Critically examine.  (250 words)

Difficulty level: Tough

Reference: Insights on India

Why the question:

The question is part of the static syllabus of General studies paper – 3 and mentioned as part of Mission-2022 Secure timetable.

Key Demand of the question:

To write about the type of monetary policy that India should adopt in the current times.

Directive word:

Critically examine – When asked to ‘Examine’, we have to look into the topic (content words) in detail, inspect it, investigate it and establish the key facts and issues related to the topic in question. While doing so we should explain why these facts and issues are important and their implications. When ‘critically’ is suffixed or prefixed to a directive, one needs to look at the good and bad of the topic and give a fair judgment.

Structure of the answer:

Introduction: 

Begin by writing about the major aims and objectives of monetary policy.

Body:

First, in brief, write in brief about the macroeconomic scenario of the country – impact of covid-19, inflation rates, developmental objectives and geopolitical crisis etc.

Next, write about the need to accelerate growth in the given situations. Substantiate with facts and statistic. Write its merits and demerits.

Next, write about the need to focus on price stability in the given situations. Substantiate with facts and statistic. Write its merits and demerits.

Conclusion:

Conclude by mentioning a balanced opinion regarding the stance that must be taken.